What do Tesla and IBM earnings signal about Big Tech next week?
IBM (IBM) shares are under pressure after releasing mixed third quarter results showing artificial intelligence (AI) and software growth with weakness in other areas. Tesla (TSLA) stock is on the rise after the electric vehicle (EV) maker kicked off “Magnificent Seven” earnings. With Alphabet (GOOG, GOOGL), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Apple (AAPL) earnings on deck, Synovus Trust senior portfolio manager Daniel Morgan joins Seana Smith and Madison Mills to discuss whether IBM or Tesla earnings are a better indicator of what investors should expect of Big Tech earnings. Morgan explains that IBM’s earnings were mixed but ultimately supported the AI story, “The IBM number wasn't bad. They obviously missed on revenues. But I think the expectations coming into that third quarter report were extremely elevated … It's really kind of a mixed report because they did say they generated about $3 billion in revenues directly from generative AI, and of course, everyone's really focused on that.” While IBM’s mixed results send the stock lower, Tesla, which also reported mixed results, soars. Morgan says he thinks of Tesla as being “kind of clumped into” the Magnificent Seven group. “Personally, I don't see how Tesla fits into that group. To me, they're an automaker, but they seem to be rolled into the tech group.” He notes that the positive reaction to Tesla’s earnings adds to the “good momentum” that comes into Big Tech's earnings. Big Tech earnings offer insights into how companies are spending on tech and their macro-level outlook. Morgan says that macroeconomic conditions continue to affect Big Tech spending as companies cut tech spending during heightened recession fears. He adds that the IBM report did have “some indication” of a slowdown of tech spending, with the IBM CEO saying, “One of the reasons why they fell up short in their consulting segment was the fact that CIOs are using money that would have been designated for consulting, and they're moving that into AI. They're not populating both. So we are seeing little bits of evidence that we may see some slowdown.” To watch more expert insights and analysis on the latest market action, check out more Catalysts here. This post was written by Naomi Buchanan.
